FHA Loans 101
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At the start of 2018, the FHA loan “ceiling” — or maximum loan amount — for high-cost markets increased to $679,650 from $636,150.
FHA loans make homeownership more accessible to first-time home buyers, lower-income households and other borrowers who might not otherwise be able to get a mortgage.
While financial requirements for an FHA loan are more flexible than conventional mortgages, your future home has to pass muster as well, especially when it comes to price.
Because FHA loans are insured by the government — the Federal Housing Authority pays the lender if a loan goes into default — and to ensure they’re available for those who need them most, they must be below a certain dollar amount. FHA loan limits are set by the U.S. Department of Housing and Urban Development, or HUD, and are generally 115% of median home prices in a given county.
FHA loan limits are set by the U.S. Department of Housing and Urban Development, or HUD, and are generally 115% of median home prices in a given county.”
In December 2017, HUD announced it would revise FHA loan limits in the new year, with most of the country seeing higher limits for case numbers started on or after January 1, 2018. A case number is typically assigned the day you apply, but in some situations a lender might arrange for it to be assigned at a later date.
Interested in an FHA loan? Here’s what you need to know about the new limits.
2018 FHA loan limits
The FHA loan “ceiling” — or maximum loan amount — for high-cost markets will increase to $679,650 from $636,150.
The national limit for FHA-insured Home Equity Conversion Mortgages, or reverse mortgages, will also increase to $679,650 from $636,150.
The upper limit for FHA loans in low-cost markets, also referred to as the “floor,” will increase to $294,515 from $275,665. This is the largest an FHA loan can be in a low-cost market.
The loan limit for your FHA loan will depend on where the property is located. Visit the U.S. Department of Housing and Urban Development’s website to find the exact FHA loan limit in any county.
Why have FHA loan limits changed since 2017?
“The primary reason you’re seeing loan limits increase so broadly — in more than 3,000 counties around the country — is what’s happening to home prices,” says Brian Sullivan, a public affairs specialist at HUD.
He’s referring to the steady rise in home prices over the last two years and expectations that the increase will continue. Since the FHA recalculates limits annually to make sure they’re in step with the market, the increase in loan limits isn’t surprising. But yearly increases aren’t necessarily the norm. As you can see below, limits held steady in 2015 and 2016, for example, and decreased in 2014.
2014: Ceiling decreased from $729,750 to $625,500. 2017: Ceiling increased to $636,150 from $625,500. Floor increased to $275,665 from $271,050. 2018: Ceiling increased to $679,650 from $636,150. Floor increased to $294,515 from $275,665.
Will you be affected by the new FHA loan limits?
“FHA loans are especially attractive to borrowers with challenged credit and lower FICO scores. Now with the higher loan limits, these borrowers could qualify for larger mortgages,” Angelo Rea, senior vice president and manager of Flagstar Bank’s FHA business, said in an email.
If this describes you, the new FHA loan limits may create a path to homeownership that didn’t exist before, especially if you live in a high-cost area.